England Finance

May 28 2017

Formula for Loan Payment Calculations (Plus Calculators) #loan #repayment #calculator

#commercial loan calculator

Loan Payment Calculation

By Justin Pritchard. Banking/Loans Expert

Justin Pritchard helps consumers navigate the world of banking.

How much will you have to pay for a loan? A loan payment calculation gives you the answer you need. If you just want the answer, use our free online calculator. If you’d rather run the numbers yourself, the formula below lets you do the calculation the old-fashioned way.

Different Loans, Different Calculations

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Some loans are interest only loans, where you don’t pay off the loan – you only service it by paying interest. Other loans are amortizing loans, where you pay down the loan balance over time.

If you don’t want to do loan payment calculations manually, use one of these calculators:

  • Calculator for Amortizing Loans (most home, auto, and student loans)
  • Calculator for Interest Only Loans (occasionally used for home loans)

Any loan calculations you do on your own or with an online calculator should be considered rough estimates.

Your lender may use different numbers based on different assumptions.

Amortizing Loan Calculation Formula

To do loan payment calculations on your own, use the formula below.

Loan Payment Amount / Discount Factor

Sample Loan Payment Calculation

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What is the monthly payment?

  • n 360 (30 years times 12 monthly payments per year)
  • i .005 (6% expressed as .06 divided by 12 payments per year – learn how to convert percentages to decimal format )
  • D 166.7916 (<[(1 .005)^360] - 1> / [.005(1 .005)^360])
  • P A / D 100,000 / 166.7916 599.55

Check your math with the Loan Amortization Calculator .

Interest Only Loan Payment Calculation Formula

Example (using the same loan as above): $100,000 times .06 $6,000 per year of interest. 6000 divided by 12 equals $500 monthly payments.

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